Asian PP market: Oil deal re-juvenile player's confidence

As the homo-PP market in Asia was heading south earlier this week due to persistent weak demand and the tremendous pressure from the heavy in-flow of low priced USA cargoes; major oil producers unexpectedly reached an agreement to cut production output, which elevated crude prices immediately and re-enforce the confidence in the Asian PP market. At the moment, however, there is no solid statement from suppliers intended to increase PP prices to the region; yet one common view is that room for further reduction appear to be very limited.

In China, the withdrawal of the USA homo-PP offers gives the market a serious break from intense competition that pull down prices in the past two weeks. In addition to the surging energy market, players reported that Middle Eastern homo-PP at the $1000/ton observed earlier of the week is now no longer available. A trader offer Saudi homo-PP at $1010/ton CFR China said, “We think market is heading for a stabilization in the near term and depending on the sustainability of the firming trend in energy and futures markets, PP suppliers shall attempt to up adjust their offers.” However, demand condition must be supportive if sellers wish to successfully increase their prices.

Meanwhile in Vietnam, homo-PP at $1000/ton mark have either been sold out or withdrawn from the market. Buyers wish to make additional purchases at this level are unable to locate the material. Suppliers appear to be more optimistic about the near term outlook with an international trader said, “We have concluded the final batch for Saudi homo-PP yarn at $1000/ton today while our Indian supplier have withdrawn their offers. We think prices are unlikely to move lower in the near term at the current energy market. Local traders are still reluctant to make replenishment; but converters are no longer hesitating about their purchases.”

Within the region, Indonesia market continues to witness price reduction, especially for Southeast Asian material. Vietnamese homo-PP to the country dropped $30-40/ton from last week, touching $1090-1100/ton CIF Indonesia, LC AS term. A converter said, “Our supplier only willing to give additional $10/ton discount on deals and we plan to purchase some quantity as we are running low on inventories.” A trader added, “We think with the current energy market, international suppliers might increase their offers; just that domestic ground might remain stagnant.”

The firming energy values might have little direct impact on the polyolefin prices; however, player’s confidence does. While it is still unclear on the viability of any price increment, the downside is also temporarily limited. With fading demand in Indonesia, Philippines and India, any large hike would face tough resistance.